Profit Sharing Pays Off in Harmony, Firm Discovers

Jacques D. Wimpfheimer says he has a solution for U.S. companies struggling to keep pace with foreign rivals or searching for ways to solve labor problems: profit sharing.

Wimpfheimer’s American Velvet Co. has never had a strike, has avoided arbitration over labor disputes and has remained competitive since it implemented a profit-sharing plan in 1940. The plan was started a year after the conclusion of a bitter 16-month walkout by its unionized workers.

The company was among six featured in a Labor Department film, released this fall, which examined labor-management techniques that others could follow to beat foreign competition and solve labor problems.

Sense of Participation

“If you have to go to work every day at a job where no one cared if you did well or badly, if you don’t share in the profits, it would be pretty damn boring. In fact, it must be terrible,” said Wimpfheimer, president of American Velvet, a fabric maker for more than a century.

“Granted, everyone can’t be in business for themselves. Still, in a sense they can feel every day they are participating, that what they do is effective and that they are in a way working for themselves,” he said during a recent interview.

In addition to profit sharing, American Velvet gives employees a voice in the operations. Daily morning meetings for planning and problem solving are attended by company executives, the union president and another worker.

There also are twice-a-month meetings for representatives of each department to swap ideas and discuss problems with Wimpfheimer and other executives.

Started Firm in 1845

“Profit sharing is financial participation,” Wimpfheimer said, “but in exchange for sharing our profits, we expect employees to give us ideas to work well, efficiently and to cut waste material. We hope to turn them all into capitalists.”

Wimpfheimer’s family began velvet manufacturing in the United States in 1845 in New Hampshire. It started manufacturing in Stonington in 1892 in the same factory of brick and exposed wooden beams it now occupies. The company has plants in Orange, Va., and England, where profit sharing also is used.

The company is privately held, and its sales and profit figures are not publicly disclosed. Wimpfheimer will say only that his company has three U.S. competitors and that they share about $50 million in annual sales.

The Stonington plant employs 250 people, with the blue-collar workers represented by Local 110T of the Amalgamated Clothing & Textile Workers Union.

The average salary is $8.59 an hour, and when combined with pension and health insurance benefits, the workers are compensated about $12 an hour, according to company figures.

The employees also share in 22% of the profits, paid out in cash near the end of each calendar year. The payment was 4.5 cents for each dollar earned last year but has ranged from nothing to 39 cents per dollar, Wimpfheimer said. This year’s payments haven’t been figured.

Lucy Sylvia, president of Local 110T and an employee for 31 years, said she had no complaints about the way American Velvet is run.

“If there is a problem, we do sit down and talk about it,” she said. “It’s a good relationship.”

Sylvia, who has been union president for 10 years, said workers will seek dental benefits and an improved pension plan when their three-year contract expires in 1989.

Settled With Workers

Wimpfheimer said the company and workers had a stormy relationship leading up to their first collective bargaining agreement, signed in 1937. The next year, the workers went on strike over a management request that weavers tend to four rather than two looms.

The strike forced the company to consider moving south, as so many northeastern textile mills did, selling out or seeking a solution.

Wimpfheimer’s father, Clarence, bought the business from the rest of his family and settled with the workers, installing a local, active management and profit sharing.

The union was at first skeptical of profit sharing and the changes that Wimpfheimer’s father instituted. It signed an initial one-year contract that was eventually expanded to cover three years.

“It was so bad they didn’t believe him and the feeling was so high they thought there was some advantage for him in this profit-sharing plan,” Wimpfheimer said.

Sylvia and Wimpfheimer said the main issue concerning both sides now is that some newer employees take profit sharing for granted and don’t offer enough new ideas to make the company more efficient. It’s one reason the company started regular meetings with department representatives.

“The biggest fault of the system now is that we have too many second- and third-generation employees who’ve never worked anywhere else and take profit sharing for granted,” Wimpfheimer said. “Our big problem is getting across to them that not everyone does this . . . and trying to explain to them that this is a system where they can help themselves.”

The problem the company has with new employees is also similar to the troubles Wimpfheimer has had with other executives. He has tried for years to persuade other companies to adopt profit sharing and avoid bitter labor disputes.

“We pay it (profits) when we can afford it. If we’re making profits, the wages are there. If they’re not, the wages are lower and we can compete,” Wimpfheimer said. “All of us are living off this company. It’s important to stay in business and not be driven into the position that the steel industry was driven into where the labor costs were so high they couldn’t compete.”